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TANSTAAFL, part 2

We’ve been covering BRACtion (to borrow a phrase coined by an advisor to Baltimore Mayor Sheila Dixon) for a while.

A few themes are evident.

BRAC is being wildly oversold by the political leadership, or rather what passes for political leadership, in the affected jurisdiction. BRAC is not new. A look at the history of BRAC will show anyone who is interested that the results of gaining military functions is rarely as lucrative as the projections just as the impact of losing an installation is rarely as dire as predicted.

BRAC is viewed as a cash cow the state of Maryland and by the affected jurisdictions. They seem to believe that the fiscal pressures requiring the Department of Defense to divest itself of real estate and functions are somehow put into suspension when they wish to snuffle up to the federal trough.

Now the realization is setting in that BRAC, far from being a golden goose might very well be, to follow the animal metaphor, a white elephant.

More follows below the fold.

In capitalizing on BRAC the state government and the governments of Harford and Anne Arundel counties are operating at a distinct disadvantage. They lack the ability to control the timing or conditions of BRAC and this is compounded by a mindset that is focused on generating taxes, per se, rather than generating wealth that can be taxed.

The Defense Department, on the other hand, is focused on reducing its costs across the board.

For instance, when Sheila Dixon did her first belly flop in the very small BRAC pool we pointed out that BRAC was going to reduce the number of military families currently renting or owning housing in Maryland because Fort Meade and Aberdee Proving Ground were adding some 3,200 housing units to their family housing stock. Housing units that will not only be free of property taxes and the insane proposed sales tax on real estate rental services but free to the occupant.

But the Army’s push to develop its land in Maryland is generating static among some local and state officials, who contend that the federal government should help pay for the costs of road and highway improvements and other public services needed to accommodate the growth occurring on and around military bases.

Anne Arundel officials, for instance, point out that an office complex planned by Trammell Crow Co., a Texas-based developer, at Fort Meade would have to pay $6.7 million a year in local and state property taxes, plus $3.5 million in impact fees if built on private land. The complex could house up to 10,000 workers.

“I’m not expecting a check from the Army,” said County Executive John R. Leopold, “but I am hoping for this property tax revenue from Trammel Crow and its tenants.”

There’s just one wrinkle: Under Maryland law, military bases are exempt from property taxes, under legislation initially adopted in the 1940s. The General Assembly clarified or extended that status two years ago to exempt private entities on federal land if they were providing housing to military families or their work involved national defense or homeland security.

Leopold, who was a state delegate then, does not recall voting for the measure, which passed unanimously. But now, he says, he’s thinking about trying to get it repealed unless he can get Trammell Crow to pay its fair share of the $5 billion worth of county road and highway upgrades proposed to handle growing traffic.

The fact is that action by the General Assembly notwithstanding there is little reason to suppose that the state of Maryland has the authority to tax any of the facilities being contemplated by the military. And this is clearly recognized by the military.

Though the deal has not been finalized, the plan is to put the facility outside the security fence so that anyone can rent a room or attend a conference there. Col. Donald F. Archibald, who is overseeing the lease projects for Fort Detrick, said base officials have made it clear to the developer and to the surrounding community that they expect the commercial project to pay for the municipal services it uses and to pay at least some taxes, including the local lodging tax.

“We could have made the point that there’s no requirement for them to pay any taxes, but in reality and in fairness to the city, there probably are some taxes that need to be paid by the developer because they’re benefiting from the [city’s] utilities and services,” Archibald said.

A recent article in Air Force Law Review points out how significant changes in the law since the mid 1990s have eliminated the ability of state and local governments to tax private development on most federal property unless the Congress agrees to be taxed. One can be certain that the tax free nature of the development has to be a factor in the negotiations between Defense and developers of these various projects.

We’ve said it before and we’ll say it again: 1) the number of jobs gained by BRAC will be a small fraction of the number now being promised and 2) BRAC, far from being a windfall, will be revenue neutral or a revenue loser.

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